Settling with Iran: $1.7 Billion and U.S. Hostages

Download the full research memo here.

Executive Summary

On January 17, 2016, the Obama administration announced that Washington and Tehran had reached a $1.7-billion settlement on an outstanding claim against the United States for military equipment predating the 1979 Iranian revolution. On the same day, Iran released five American prisoners in exchange for the U.S. dropping the charges against seven Iranians and withdrawing Interpol notices for 14 others. In January, journalists and lawmakers began raising questions over the linkage between these two agreements – as well as the connection of both to the nuclear agreement. Administration officials denied any connection between the three.

In August, The Wall Street Journal revealed that the administration had sent $400 million of the $1.7-billion settlement to Iran in cash on the same day that the hostages were released, renewing questions over whether the payment was “ransom” for the hostages. The administration argued that sanctions regulations required the funds be transferred in cash via foreign banks; however, existing regulations permit all transactions related to settlement payments from the Iran-United States Claims Tribunal. Therefore, it appears that the administration’s argument is flawed.

This memo outlines the available information on the $1.7-billion settlement and the manner and timing by which the funds were transferred to Iran.